India's retail inflation in November firms up to 4.91%

India's benchmark inflation rate, measured by the Consumer Price Index (CPI) firmed up to 4.91% year-on-year in November on the back of a rise in vegetable prices, data released by the Ministry of Statistics and Programme Implementation on Monday showed.

With this, the CPI has remained within the tolerance level of 2%-6% for the fifth consecutive month. According to the Monetary Policy Committee’s official mandate, the rate-setting panel is supposed to keep inflation in a band of 2-6%, with the medium-term target being 4%. A Reuters’ poll of economists had pegged November’s retail inflation reading at 5.10%.

Core inflation, which is the non-food non-fuel component of the CPI basket, stood at 6.1% against 5.8% seen in the month before. Inflation in the food basket in November rose to 1.87% from 0.85% a month ago.


Fuel & light inflation came in at 13.35% against a rise of 14.35% seen in October.

"Easing prices are a relief for policymakers, but we believe this might be temporary as demand picks up. We expect prices to rise over the next two years with demand for goods driving inflation. Social distancing practices and occasional local lockdowns may continue to impact services’ demand for some more time," expressed Rumki Majumdar, Economist, Deloitte India.

A similar phenomenon is being experienced in the US and EU, where a strong rally in demand is met by supply constraints because of supply chain disruptions and shortages. India may also experience a similar trend once pent-up demand rises faster than supply early next year, said the economist.

In the October retail inflation reading, CPI ticked up 4.48% year-on-year, mildly higher from the five-month low reading of 4.3% in September 2021. The mild firming up of inflation in October was on account of hardening of food & beverages and fuel & light inflation relative to the month before. October CPI was within the tolerance level but the core CPI was higher at 5.8% in October, a 4-month high. In November 2020, the reading was at 6.93%.

The MPC in its December 2021 policy meeting had opted to support growth by leaving the rates unchanged and maintaining its accommodative stance. The committee expects the spike in vegetable prices to reverse with the winter arrivals. RBI expects CPI at 5.1% for Q3 and 5.7% for Q4 of this financial year, RBI Governor Das reiterated at the policy meet outcome.